How child and dependent care tax credit can give you a better life

You may face big trouble to manage both house, kids and your profession during your kid’s summer vacation in this year. You may want to send your children to the summer day camp but the high cost is a big hindrance. It is true, that summer babysitting expense is a big matter for many working parents. But most of working parents are totally unaware that they can get tax break to cover all the babysitting expenses to provide day care of their loving kids, spouse or other dependents.

Working parents can apply the expenses to child and dependent care tax credit. It can help them to save on their tax bill at filing time. But there are some notable IRS eligibility guidelines they need to meet.

Following are some care services which are noticeably eligible for the credit.

For nursery school and kindergarten costs. Child care expenses are separated from the schooling costs.

Day camp program expenses. Overnight camp is not included.

Dependent-care centers having authorized license.

Private home nurses.

Household need when it requires the services to provide protection.

Who are your dependents?

You can claim for the credit to provide care to your child. Your child should meet some criteria first. You need to consult your tax adviser if you’re a divorced parent or single parent to know the tax filing instructions properly.

The child must live with you most of the times.

He/she must be under the age of 13.

You can claim for the credit or tax break to take care of other dependents . The other dependents should meet the IRS criteria such as:

A physical or mental disable person (paralyzed)

Age no bar.

When you can claim for dependent care - IRS requirements

When you are an employed person.

If you’re married, then both of you should have a job or should be looking for a job.

You’re not eligible to claim for credit if the dependant or child is younger than age 19.

You need to qualify as widow or widower with a dependent child.

If you're single parent or head of the household.

Exception:

When one spouse is a full time student.

When one spouse is disabled.

Mention the details of caregiver in the tax form

Identify the name and identification number of the caregiver while filling the tax form. You can get the caregiver’s identification number from the caregiver centre.

You need to use Form W-10 (Dependent Care Provider's Identification and Certification) to get all the information about the caregiver from the centre/ provider.

If you appoint the caregiver individually, you should use the caregiver’s social security number in the form.

Exception:

You should pay the employment taxes if you keep a caregiver at home to provide care.

How much you can claim

A taxpayer is allowed to claim up to $3,000 for one dependent.

A taxpayer is allowed to claim up to $6,000 for two or more qualifying dependents.

A single parent's income should not exceed $100,000 if he/she claim for credit.

The amount will depend on your gross income.

Exception:

Not necessarily the credit will pay all the cost .

The IRS limits the dollar amount when a taxpayer claims for credit.

Some other facts when claiming the child and dependent care tax credit

Child and Dependent Care Tax Credit is very useful to cover the cost when you want to care for your child, spouse, other dependent . There are some IRS guidelines/facts you need to know when you're claiming for Child and Dependent Care Tax Credit to meet the care costs.

Fact 1 - Attach the form 2441 when you’re claiming for credit. Software will do this on behalf of you if you use IRS e-file.

Fact 2 - Do not forget to mention the social security number for all the eligible individuals.

Fact 3 - When your employer provides you the dependent care benefits, you need to go through the form 2441 to know the rules in details.

Fact 4- If you keep someone to take care of your dependent, spouse, child in last year, you are eligible for the child and dependent care credit. In that case, you should file your federal income tax return.

Fact 5 - Follow “qualifying individual” when you are claiming for Child and Dependent Care Credit. “Qualifying individual” requires your dependant or spouse to live with you for more than half the year in case of disability. The age of your child should be under 13.

Fact 6 - Payments for care cannot go to your spouse, child who is under age 19.

You can get information in detail at IRS.gov. The federal government encourages all the parents to take advantage of Child and Dependent Care Tax Credit to cover the expenses of raising a child and manage a disabled spouse or dependent efficiently.

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Disclaimer: The contents of this web site are not intended to establish an attorney-client relationship, provide the reader with legal advice, or substitute for legal advice from an attorney.

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